Fall fertilizer delivery questions shaking up the market

WASHINGTON, Oct. 1, 2014 – As farmers accelerate the 2014 corn and soybean harvest across the country, a key 2015 input is demonstrating some marketplace volatility with potential savings that might not make it all the way to producers.

Fertilizer delivery was an element in delivery problems with the rail system in parts of the Upper Midwest last fall and continues through the present day. With all the focus on moving the 2013 grain harvest, not much attention has been paid to the arrival of fertilizer for the 2015 growing season. So what does the fertilizer market look like?

For starters, experts predict falling commodity prices will trigger a decrease in the price of fertilizer. Sources say fertilizer is an input that responds quickly to the changes in the commodity market.

“The trend is that fertilizer, especially nitrogen fertilizer, tracks corn prices pretty close,” Andy Swenson, with the North Dakota State University extension service, said in an interview with Agri-Pulse. “It would be a deviation from past trends or relationships if they didn’t come down.” Corn prices are near four-year lows.

Ken Astrup, general manager of Dakota Plains Cooperative in Valley City, North Dakota, said the money saved on fertilizer might be checkmated by an increase in the cost of getting it to the farm.

“You’ll probably see some reduction in the price of the fertilizer, but I think you’re going to see the cost of freight going up, it’s going to make the [price] differences pretty small,” Astrup said.

Questions also remain regarding how much fertilizer producers will use and when it will be ordered. If producers plant more soybeans in the spring, that crop will take less fertilizer than corn or wheat. If producers shift away from using fertilizer this fall because of crop changes or other reasons, that may mean an increase in spring fertilizer demand.

“There’s no way the system cannot put fertilizer on in the fall,” Astrup said. “If everybody decides that they want to wait until the spring, the system, the logistics will not allow enough product to get moved to allow farmers to put it all on,” Astrup said.

As some producers wait and see on some input decisions amidst a period of lower prices, Astrup said that can make it difficult to have enough supply on hand. “Unless we get orders from farmers,” it will be tough to have enough product on hand.

No matter the changes in demand, Astrup is confident that public pressure on rail companies from lawmakers, elevator operators, and fertilizer manufacturers will prevent delivery delays of fertilizer this year.

“The stuff that we have on order now, we’re not seeing any issues with that product getting here in time,” Astrup said. “We are seeing issues with the freight being higher.”

In the latest weekly reports to the federal Surface Transportation Board, Canadian Pacific showed an improved situation on the rail backlog picture, and BNSF Railway showed more delays – a reversal of the trend of recent weeks. As of Sept. 25, BNSF’s 2,072 past-due rail cars in North Dakota was an increase of 44 percent from the previous week, while CP saw a 3.8 percent reduction. Nationally, BNSF’s past dues were up 13.2 percent and CP’s report said the 2,868 grain orders fulfilled in the week ending Sept. 21 was the company’s “best performance of 2014.”

Experts say the increase in past-due orders also reflects the new orders being placed to accommodate the 2014 harvest.

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